The official jobless rate is so low the Fed thinks the economy is at full employment. But a gauge of the 'functionally unemployed' keeps climbing
The Labor Department’s unemployment rate has been declining in recent months, reversing last year’s uptick, but an alternate measure tells a different story.
TL;DR
- The official unemployment rate dropped to 4.1% in July, but an alternate measure shows a different trend.
- Factors like retiring baby boomers and immigration policies are shrinking the labor market, contributing to the lower official rate.
- The 'True Rate of Unemployment' (functional unemployment) has increased for four consecutive months, reaching 24.9%.
- Functional unemployment has increased for white workers and women, while decreasing for Hispanic workers and men.
- The Federal Reserve views the low official unemployment rate as a sign of full employment and is focusing on inflation.
- Economists anticipate the breakeven rate of employment growth to turn negative again, indicating job shedding might be needed to maintain steady unemployment.